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The rollercoaster ride continued but we are back to positive returns August 3rd, 2010

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August Market Update

The rollercoaster ride continued in the month of July - but we are back to positive returns after the second quarter delivered 3 consecutive months of declines.

	June 30th 2010	July 30th 2010	July 2010	Year to Date
Toronto Composite (TSX)	11,294	11,713	+3.7%	-0.3%
Dow Jones Industrial Avg.	9,774	10,466	+7.1%	+0.4%
S & P 500 Index	1031	1102	+6.9%	-1.2%
Canadian Dollar (vs. US$)	0.9396	0	+3.9%	+2.8%

My expectations for the calendar year 2010 continue to be that equities will marginally outperform bonds and bonds will outperform cash. Return expectations for equities in 2010 is a modest 5% to 7%.

With 2010 2nd quarter earnings season almost behind us, 344 companies in the S&P500 Index have reported Q2 earnings thus far with 75.3% of those companies having delivered positive earnings surprises, and only 15.1% missing estimates. Adjusted earnings for Q2, 2010 are up 33.46% over the same period last year.

On August 2^nd, Fed Chairman Ben Bernanke made a speech in South Carolina implying the US Federal Reserve will watch and wait in the short term to see if the economy struggles further before taking more stimulative measures. Bernanke said he expects consumer spending is "likely to pick up" during a "moderate" economic recovery

In an op-ed1 piece in the August 3rd New York Times, Treasury Secretary Timothy Geithner wrote "Welcome to the recovery" - "a review of recent data on the American economy shows that we are on a path back to growth" - "business investment and consumption — the two keys to private demand — are getting stronger, better than last year and better than last quarter".

Sentiment in Europe rose as the European Commission's measure of morale across the 16-nation euro zone was fueled by Germany, where the manufacturing sector is rebounding and unemployment fell for the 13th straight month in July. The Financial Post reported that due to rapid population growth, India will add 110 million new workers by 2020, suggesting that India, and not China, will be the world's real growth engine over the next decade and beyond. As a result of China's one-child policy, the Chinese labour force as a proportion of its population has already peaked and is on the decline.

¹ An op-ed, abbreviated from opposite the editorial page, (though often mistaken for opinion-editorial), is a newspaper article that expresses the opinions of a named writer who is usually unaffiliated with the newspaper's editorial board. These are different from editorials, which are usually unsigned and written by editorial board members.